Cycling sponsors face doping dilemma after Armstrong scandal

LONDON (Reuters) - Cyclist Lance Armstrong’s doping scandal is causing sponsors to question their future in a sport that allows them to reach mass audiences at a moderate price, but risks tainting their brand.

The Dutch Rabobank pulled out of professional cycling on Friday, ending a sponsorship deal worth 15 million euros ($19.6 million) a year and leaving one of the Tour de France’s best known teams facing an uncertain future.

U.S. sport wear giant Nike dropped seven times Tour de France winner Armstrong last Wednesday after the U.S. Anti-Doping Agency said his success had been fuelled by an elaborate and sophisticated doping scheme.

The choice for companies is stark. Do they cut their losses to avoid contamination from the sport’s dark past or buy into the view that Armstrong’s demise marks the end of that era?

“I know that our sponsors continue to be very supportive and view this as a necessary process to move the sport forward,” said Jonathan Vaughters, manager for the Garmin-Sharp team.

“Our sponsors now require us to be very focused on anti-doping procedures,” added Vaughters, speaking in a telephone interview from the United States.

“We have very strong clauses in the contract, which means if there are any current anti-doping infractions, that can cause total termination.”

Vaughters admitted to doping during a career as a professional rider but launched his team five years ago with a public commitment to clean riding.

The team has won over Japan’s Sharp Electronics, who signed up as a sponsor in June 2012, sharing naming rights with Garmin, the U.S. maker of navigation devices.

BIG, AFFLUENT TV AUDIENCES

Besides sponsorship, cycling teams can earn prize money in major events like the Tour de France, the world’s top cycle race, which will stage its 100th edition in 2013.

Bradley Wiggins scooped 450,000 euros for his Sky team in July when he became the first Briton to win the Tour, and there is prize money for each daily stage winner.

The Tour, run by the family-owned French group Amaury Sport Organisation, does not charge spectators but generates its income through the sale of TV rights to an estimated 190 countries and has its own sponsorship deals.

Rabobank’s departure is unlikely to trigger a mass exit from a sport that delivers such exposure, said Ulrich Lacher, Managing Director of sponsorship strategy firm IFM Sports Group.

“There is hardly any other sport that offers such good return on investment in terms of media exposure, especially in western and southern Europe,” said Lacher.

“In cycling, team names are mentioned in reports in all the media and the sponsorship fees involved are relatively modest,” he added. “If you are looking for immediate and affordable brand awareness, it is a unique opportunity.”

To sponsor the shirts of a top European soccer club can cost upwards of 20 million euros per season and, in contrast to cycling, the company does not usually get to put its brand in the team name.

Cycling also has an ideal consumer base for sponsors, attracting affluent and active middle-aged men who get on their bikes at the weekend when their fathers would have headed for the golf course.

“Cycling is probably the sport with the highest buying power of any fan group in the world,” said Vaughters of Garmin-Sharp.

SPONSORS REASSURE

Rabobank’s departure was the biggest blow to the sport since the German mobile phone company T-Mobile quit in 2007, sick of a series of doping scandals.

In the wake of the Armstrong affair, teams are underlining their commitment to clean riding.

Sky, the road race team formed in 2010 as an extension of pay TV company BSkyB’s sponsorship of British cycling, warned team members this week that they faced the sack unless they signed a document saying they had never doped.

In the wake of the Rabobank exit, other major sponsors have offered some reassurance that they will stick with cycling.

The Lotto Belisol team, funded by the Belgian national lottery, said it would remain in the sport, estimating that the benefits were worth four times what it spends.

Denmark’s Saxo Bank recently renewed for 2013 its sponsorship of a team owned by Bjarne Riis, a Dane who won the Tour in 1996 but later admitted to doping.

“We have full confidence in the Saxo Bank team and especially their owner Bjarne Riis,” said Kasper Elbjorn, head of group public relations at the bank.

“The sponsorship has been a great branding exercise in Asia and in Europe where we have most of our offices.”

After the shock of losing their backer, Rabobank’s riders are hoping that a new sponsor will keep them on the road.

“Great time for a sponsor to jump onboard, help improve cycling and its image!” Australian Rabobank rider Mark Renshaw said in a tweet. “There are riders who are clean, work hard and love the sport.”